The government will seek to raise the bill of measures aimed at bolstering business activity and increasing investment in Greece up to 2 billion euros.
Besides reducing the corporate tax by eight percentage points and slashing employers’ social security contributions by 2.4 percentage points, the growth-boosting package will also include the adjustment of the tax deposit from 100 percent to 70 percent for enterprises that implement investments.
The activation of those measures will signal the reduction of income tax for corporations by more than half, while the total employer cost will be reduced by at least two percentage points.
The implementation of this package as well as its final timetable will depend on the course of negotiations with the country’s creditors. The reduction of the tax deposit rate requires that the creditors’ approve the change of use of the profits of eurozone central banks from Greek bonds (SMPs and ANFAs), while the further reduction of social security contributions and income tax to a great extent requires the reduction of the primary budget surplus targets.
The package of growth-minded measures for business is expected to be expressed as a government proposal for the midterm fiscal plan to be tabled in Parliament this April and to contain alternative scenarios depending on the creditors’ decisions.
Out of the 2 billion euros of the package, approximately 800 million has already been legislated but not yet applied. This figure concerns the first stage of the corporate tax reduction from 28 to 24 percent and the first wave of social security contribution reductions by employers from 24.81 percent today to 24.33 percent as of June. For now it remains unknown when the second phase of these reductions is to be implemented.
The state collects some 2 billion euros every year through the corporate tax deposit, so the reduction of its rate from 100 to 70 percent necessitates finding a new funding source, as especially in the first year of the measure’s application – which the government hopes will be this year – the revenues to be demanded from businesses will be reduced by at least 300-400 million euros, depending on the response by corporations.